If anything, the acute shortage of essential supplies due to the Indian blockade has created a vibrant black market of petroleum products and other essentials in Nepal. Ever since India imposed a blockade in late September, Nepal Oil Corporation (NOC) has sold petrol and diesel to the public only twice. However, the number of private vehicles plying on the streets clearly indicates how black marketeering has created a parallel economy. Likewise, though Liquefied Petroleum Gas (LPG) cylinders are rarely available in the market from official channels, hotels and restaurants continue to purchase them through black marketeers paying double the price and sometimes even more to keep their businesses running.

Although the protests in the border areas and the Indian blockade have managed to halt the official trade, people living near the Nepal-India border have been crossing over to the Indian side and are smuggling these goods inside Nepal, which is then supplied all over the country at a very high price. It has been reported that almost 5,000 to 8,000 litres of petrol is smuggled into Nepal everyday from border towns. As for LPG cylinders, they are either directly smuggled into the country or empty cylinders are taken to the Indian side, refilled and brought back.

Black market, also known as shadow economy is illegal and discouraged for a simple reason—it crimps government revenue and extorts the public. According to a report by the International Monetary Fund titled ‘Hiding in the Shadows: The Growth of the Underground Economy’, expansion of the shadow economy can start a cycle of tax evasion. As a result of illegal transactions, tax revenues remain lower than what they should be. Then, the government might have to increase tax rates which could further encourage tax evasion. The Nepal government has already incurred huge losses in tax revenue this year due to the earthquake. Revenue collection for the period of April-May stood at Rs 21 billion against the target of Rs 37 billion according to the Finance Ministry. The losses in government revenue due to the ongoing black marketeering of petroleum products will automatically be exacerbated and it can have long-term effects.

On its part, the government claims that it has been keeping a tab on black marketeering. But even the state-owned sole supplier of petroleum products, the NOC, has been suspected of being involved in this racket. Moreover, monitoring officials often allow those arrested to go scot-free. So, while the government needs to control black marketeering, it also needs to make sure that the bureaucracy is not involved in this illegal trade. In case government officials are found guilty, they need to be severely punished. But as supply deficit lies at the heart of the problem of a thriving black market, the government must ensure smooth supplies as soon as possible.